For days, I have been trying to get a clearer picture of what is really going on outside of the largely intact gates of the major Japanese carmakers. Nobody is talking. Most keep mum because they don’t know. Some don’t talk because they don’t want to.
Now there is a rare glimpse into the matter. It has been written by Kevin Krolicki with the help of two colleagues at Reuters. Kevin is the Detroit bureau chief of Reuters. He writes about cars a lot. Comes with the territory. Kevin and I share a common affliction: A Japanese wife. A week ago, Kevin found himself going against the stream of expats that were mobbing the planes out of Japan.
Two days after the quake, Kevin went from Detroit to Tokyo to help the team of Reuters reporters in Japan. Ever since the 30 foot wave hit the coast of Miyagi, this team has been doing some of the finest pieces of journalism the world has seen. Reuters’ Live Blog of the Japan Earthquake is riveting viewers worldwide. It will become a contemporary historical document of the once-in-a-millennium tsunami.
On Sunday, Kevin stopped sitting in TEPCO press briefings. He ventured out as far as he could. He visited factories, or what used to be factories.
He writes about Texas-based Freescale, which made accelerometers, pressure sensors and other chips for cars in Sendai, the city hardest hit by the tsunami. Japan may only make 20 percent of the world’s semiconductors. Kevin points out that Japan makes, or made, 57 percent of the wafers semiconductors are made from.
He writes about ball bearing giant NSK, whose “list of automotive customers obtained by Reuters reads like a who’s who of global automakers.” None of the factories are damaged, but most are down “due to uncertainty over power supply.” If I recall right, NSK owns more than half of the European automotive ball and roller bearing market alone.
The article is titled “Disasters show flaws in just-in-time production”, and you should not just read it carefully. You should not just bookmark it for later reference. You should print it out on paper, as a reminder that the power can go out.
However rare and insightful, the article remains a glimpse. I haven’t talked to Kevin yet, but when I will, he will probably tell me that he has no idea of the extent of the damage. Nobody does.
Will the tsunami be a game changer? Will we go back to the times of Henry Ford, when iron ore entered the factory on one side and cars exited the other side? After talking to many involved, Kevin and his fellow authors don’t think so:
“If there is any debate on whether the Japan quake will force a rethink on suppliers, there is apparently none about just-in-time production,” they write. “No one interviewed for this article expected any change.”
The problem with extremely specialized, narrowly ‘efficient’ processes is that they presuppose that everything will always go well, that their environmental conditions (broadly understood) will remain stable and their supply lines uninterrupted. It’s the same with virtually all forms of increased specialization, their lack of flexibility and adaptability make them extremely sensitive to changes in the environmental conditions needed for them to survive and thrive.
As a global society many of us are just three hots and a cot away from rioting in the streets. The fragility of our JIT logistics oriented society is pretty darn amazing. Great read when you take the jump.
Kevin thinks JIT is here to sty.
If disruptions like this are once-a-millennium, then JIT has no problem.
There is also probably more inventory out there than people wanted to admit.
As the owner of many cars, I find myself at a dealership getting an oil change once per month. And my trip to Watertown Toyota on Saturday was interesting. A swarm of people looking at smaller new Toyota vehicles. I watched what seemed like a fleet of Pruis, Corolla, and Rav4 vehicles leaving for test drives. Prius were really interesting. As soon as one came back, if no deal was in the works, it immediately left on another test drive. I have never seen this kind of activity. I wonder if this is also going on at Honda dealers. It is like people are buying the Toyota they want now because they fear being forced into a Detroit vehicle once the Toyotas are gone. After reading his article, now I understand why. No parts = no cars. Not even Detroit cars. On second thought, on my way home from work, I am going to stop at either a Toyota or Honda dealer. A Buick or a Ford? Horror.
OTOH, sole source has got to have risk factors attached to it.
There was a time in the past when the company I worked for was the sole supplier of a fairly critical low-volume electronic widget for Chrysler. And I was the sole North America planner. If I’d dropped the ball and nobody noticed for a couple of months, they would have been screwed, and scrambling for an alternative to keep the line running.
JIT will be here to stay, but if anything happens, it is likely that manufactures will have plants globally. If another disaster like this hits China instead of Japan, I think everyone will be in a world of hurt, not just the auto industry. Just think about a 30 ft wave of water hitting them.
Every system has its vulnerabilities. The eartquake and subsequent tsunami isn’t an endightment of JIT, any more than it is of nuclear powerplants. From time to time there are circumstances that are simply beyond our control and exceed our capacity to prepare for them. It is time, as they say in recon to improvize adapt and overcome.
HUA!!!
Good article. Bertel, if you want to read a good book on this subject, I’d recommend “End of the Line” by Barry C. Lynn. It’s a few years old now, but predicts all these sorts of supply disruptions. Ultimately, just in time production can be more or less robust, depending how much money you spend. But, with the pressure for more profits next quarter (and good ol’ competitive advantage) there are strong forces that work against making just in time anything but a system that works in the best of all possible worlds. Lynn ultimately argues that governments will have to step in to make the modern production system less vulnerable to supply disruptions. Lynn also predicts this will only happen when a supply disruption by itself fucks over the global economy. This has nearly happened already; one earthquake in Tai’wan nearly destroyed all the world’s RAM factories.
The photo at the top of the post illustrates exactly what I’ve been saying for years about the most practical vehicles for TEOTWAWKI, it’s bicycles, not any kind of hydrocarbon powered vehicle. A bicycle will get you through a tsunami……and zombie attacks. Zombies have been known to suck the fuel out of motor vehicles just before they attack.
On the other hand, many early zombies will be hipsters, since they are both sexually promiscuous and easily beaten up, and it’s possible that anyone on a “fixie” will be toast as the zombies put on their faux-lensed glasses and accelerate into warp-speed runs up a hill at them.
In the event of an apocalypse I’d discount the people on fixies immediately. I mean, if you make the conscious decision to say no to a freewheel, I don’t think you have the intelligence to navigate the post-structuralist environment anyway.
Fixies?! Fixies are so 2008.
Zombies are easily dealt with provided that you’ve equipped your bike with the proper type of zombie repellent. Anti-zombie rig here: http://www.free-images.org.uk/military/home-guard-bicycle.jpg
Zombies? I know how to deal with zombies. Keeping a JIT car manufacturer humming? That’s another story.
I must be getting old. When I grew up, hipsters were a generation before us. They read Sartre and had fantasies of carnal knowledge of Simone de Beauvoir. And fixies … lets not go there. Neither had anything to to with bicycles.
Too funny. That’s how I think of hipsters as well (and I’m also not touching the ‘fixies’ thing)…
Most of the “hipsters” are dead and most of the hippies are either dead or so brain-fried they’re “persona non grata”, or just plain useless and a waste of good oxygen and toilet paper. As far as “JIT” is concerned, business philosophies change every so often. For the life of me, I can’t figure out how JIT saves anyone any money, but I’m not a businessman, just a working guy who loves cars; well, certain ones anyway. I’m all for bicycles, though – now just make suburbia more friendly towards them – I’d love to ride the two miles to Kroger for a few things, but no – roads are too dangerous and narrow in my neck of the woods in the northern suburbs of Cincinnati.
I’m fond of all modes of motorized transport, cars, boats, planes, motorcycles…..especially motorcycles, but America sure seems to have dug it’s own grave with almost 100% reliance on private motor cars for transportation. American transportation infrastructure was constructed without any regard for mass transit….pedestrians or bicycles…..most of it was built to prevent any access by pedestrians. Recently a new Lowes Home Center was constructed in my suburban town. There is no pedestrian or mass transit access to this place, none. It’s like an island surrounded by four lane highways on two sides and fenced off on the remaining sides. Getting to this place on foot would require a suicidal dash across four lanes of heavy traffic moving at 50mph. I can literally see the place from house, but if I want to shop there, I must drive.
@Skor & Zackman: I had lived in Metro Atlanta, where everyday living involved a freeway trip for the most mundane things. A number of years ago, Home Depot opened a new store with bicycle racks in the parking lot. In a new shopping mall that was built from the ground-up, i.e., the developers had flattened a wooded area to create this shopping center. It was far away from any housing developments. I remember the first time I went there and saw the bicycle racks, I thought to myself: Who would bicycle to this Home Depot? And what would/could they purchase that they could use a bicycle to transport it back to where they came?
I would agree we need to look at more human scale transportation options. But so long as everyone thinks they need four acres of land as their front yard, it might be hard to implement.
Yeah. We’re on common ground here. When we lived in an older suburb in the St. Louis county area – you know, the neighborhoods built after WWll where they had the forethought (or law) to build sidewalks and streets with sufficient shoulders, I used to ride my bike along with my kids all over town. I even used to ride to the local K-Mart a mile or so away and buy and strap stuff to a luggage rack I put on the bike to actually carry stuff on and cruise on home. Ditto for the grocery store. Where I live now, we have a lot of two-lane roads virtually unchanged from when they were wagon and horse trails in the late 1800’s – no joke! I do see people thinking they’re Lance Armstrong and dare to ride and really causing a serious hazard, not only to themselves, but to drivers as well. I’m somewhat familiar with a bit of the Atlanta area, too. Especially Stone Mountain, and those roads are much like ours. Right now, it’s two miles to Kroger and three miles to Ace Hardware, four and over to Lowe’s, Meijer, Home Depot, fast food row and everything else. It stinks. At least in my neighborhood, I can walk the dog around in a one or two mile loop. Exercise, at least, in addition to the gym. Anyway, somehow, somewhere, local governments really screwed up, and they wonder why we waste so much oil? Don’t even get me started on passenger rail service, Amtrak doing the best they can under lousy circumstances.
@Geozinger
10 bucks says those bicycle racks were required by zoning, or mandated by the “planning” department as part of the permit process to build the mall. Or some similar regulatory influence.
@Steve65: No doubt that’s what happened with the placement of the bicycle racks. For as (not) useful as those things were, they could have just as well put in copies of the Venus de Milo. At least the place would have looked classier…
@Zackman: I’m fortunate to live in an older suburb of Grand Rapids, where if I choose, I can walk to many of the things that daily life demands. We still have many sidewalks in excellent condition (considering our winters), and since I’ve lived here I can do 50% of my business within a two mile radius, and 95% within eight miles. Best decision I ever made.
I guess I may be in luck, my 1970’s subdivision in Beaverton, OR is about 1 1/2 miles from a supermarket via a bike path in a park, and there is a freight railroad 1/2 a mile from the supermarket, in case truck transport fails. Worst case the nearest working farms are about 4 miles down the road.
On the other hand when we bike to the library we usually go to the one in Tigard because it’s on a bike path and Beaverton’s libraries are on main roads.
I read the Reuters article you referred to. I don’t think the situation is an indictment of JIT. The reason that you do JIT, is that inventory piled up costs money. Someone has produced that inventory, and they expect to be paid for it . . . because their workers who built it expect to be paid and their suppliers who supplied the parts/raw materials for it expect to be paid. JIT requires greater integration and coordination of the supply chain . . . which is now possible with modern communications and computers.
The situation in Japan is more an indictment of the violation of another basic principle: never rely on a sole source supplier. There are lots of reasons for that, having nothing to do with earthquakes, tsunamis and the like. Rather, if you rely on a sole source supplier, then that supplier has pricing power over its product that it sells you . . . not a good thing.
And for all of those who just can’t seem to understand why the United States transportation system — for both stuff and people — relies primarily on roads and motor vehicles, the answer is simple. It works the best, because it is flexible and responds quickly to changes in consumer demand, in terms of both time and location. Capital intensive, fixed transit systems like trains do not — and can not — do that. That’s why trains only make sense as haulers of bulk cargo. Consider that intermodal transportation in the United States that uses ships for intercontinental transportation interfaces with trucks, not trains. Container ships carry containers sized to be placed on purpose-built truck trailers for delivery to the recipient. Railroads are an inefficient 19th century technology. And by “inefficient” I mean in terms of total cost — not just fuel cost. For a railroad, the biggest cost is not fuel, its the capital investment, much of which, literally is “sunk” i.e. unrecoverable and not redeployable elsewhere in the event of a change in demand.
On the other hand, DC, the flexible road network for cargo transport is massively subsidized by the taxpayer. If transport companies had to pay for the wear they inflict on roads, there would be no long-haul trucking. As for trains being unprofitable, well, I think all the highly profitable cargo hauling companies in North America would disagree with you.
As for JIT, I’d be wary about trying to generalize about it being just “good” or “bad”. JIT is good in certain contexts, as is Fordist production methods. Turning either into some sort of moral imperative that must be applied everywhere would be folly, since context is what determines if they make sense or not. The American Military in the Iraqi war tried just in time supply methods to disastrous effect; it turns out the old ways of supply have a few advantages that the generals forgot about.